Investment

The speaker focused on the design, implementation and future of the Trade Related Investment Measures (TRIMs) Agreement. The Uruguay Round provided a mandate to discuss trade restrictive and distortive effects of investment measures, and, if deemed necessary, to negotiate provisions to avoid such adverse effects on trade. The discussions in the Uruguay Round focused on the question of what measures could be considered to be trade-related. The TRIMs Agreement that was finally concluded does not provide any new language, but refers to the already existing GATT articles of national treatment (article III) and quantitative restrictions (article XI). The Agreement contains an annex with an illustrative list of measures considered to be trade-related.

There have not been many problems in implementing the TRIMs Agreement in comparison with other WTO Agreements. First, the notification process and period did not pose any problems, although some developing countries argued that this period was too short to identify all TRIMs. Secondly, there have only been a limited number of disputes. Furthermore, the transition period seemed adequate, given the fact the only ten countries requested to extend this period. While some countries had legitimate reasons to extend the transition period, other countries did not seem to be prepared to meet the deadline.

There are several options to handle TRIMs in the future within the WTO. First, the agreement can remain as it is now. Secondly, the illustrative list of trade related investment measures may be extended. Finally, the TRIMs Agreement can be complemented with new rules on investment.

The EU is favour of putting investment rules on the agenda of a new round and believes these rules will also benefit developing countries. The discussant from the European Commission said FDI to developing countries has increased rapidly recently. He argued that rules should be established to ensure that there is a level-playing field that avoids distortions and prevents developing countries from falling victims of unhealthy competition among themselves to capture FDI flows. The EU proposes to have a plurilateral agreement, so that developing countries are not required to sign the agreement.

The second discussant drew attention to the fact that the TRIMs Agreement has unbalanced consequences, because it limits the discretionary power of governments regarding industrial policy and eliminates their bargaining power vis-à-vis multinational corporations, but it does not impose any corresponding or reciprocal constraints on the multinational investors.

The two discussants had different opinions about the empirical evidence on the effects of FDI. While the official from the European Commission said there is broad agreement about the important contribution that FDI can make to the economic progress of developing countries, the other discussant said that there is still very limited evidence of this positive impact on poverty.

Competition

The speaker focused on the comparison between trade and competition policy and on the question of whether there should be multilateral rules on competition. Trade and competition policy are very similar in their objectives. Modern trade theory posits that gains from trade come from increases in total factor productivity, which in turn comes from improvements in competition. It can therefore be argued that trade policy is a subset of competition policy. The procedural aspects of the two sets of policies are greatly different however. The biggest difference in general is that competition policy deals with private practices that impede market contestability, whereas trade policy deals with government measures, mostly taken at the border, that have the same effect. The WTO cannot address private practices that restrict or foreclose trade, although limited scope for this has been introduced under the GATS Agreement.

Another important difference is that in competition policy there are no internationally agreed upon standards. The history of competition policy varies from nation to nation, and many countries do not have competition rules at all. This poses a problem, because many issues in this field, for example mergers, are taking place on a cross-border basis. This can lead to potential conflicts between the competition policies of different countries. These conflicts are likely to rise for three reasons. First, because there are more international mergers. Secondly, the markets for many products are becoming increasingly global. Thirdly, because those sectors where government regulation figures most importantly, for example in telecommunications, are most rapidly becoming globalised.

The process of globalisation asks for competition policy that is not confined within the border of one nation and for it to be applied consistently across the globe. There is little effort or will among nations to internationalise competition policy, however, mainly because nations have exhibited in recent years a growing unease with the extent to which they have already yielded sovereignty to international institutions. A difficulty of bringing competition policy in the WTO is that there are no hard and per se rules in competition policy, and in most cases a "rule of reason" approach is adopted. This may cause problems in the dispute settlement process however. Because of these reasons, cross-border issues are most likely to be solved by greater formalised co-operation among competition authorities and harmonisation of competition policy.

The discussant noted that countries need to give firms time to grow before they start restricting their behaviour. On the question of developing countries’ support for multilateral rules on competition, he noted that a multilateral agreement will help encourage the development and implementation of competition law. In addition, multinationals are likely to be more respectful of international regulations than of domestic laws enacted by weak governments in developing countries. Finally, bilateral agreements on investment, which may be the alternative to multilateral rules, will not work unless both parties have equal bargaining power.